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RBI effort to improve liquidity in the system: IMC

This will place additional Rs. 40,000 crores in the hands of banks to meet credit requirements of business in the private sector

June 03, 2014 1:04 IST | India Infoline News Service
Even as the policy repo rate and CRR have been left unchanged, the RBI Governor has done well by reducing the Statutory Liquidity Ratio (SLR) by 50 basis points to 22.5%. This will place additional Rs. 40,000 crores in the hands of banks to meet credit requirements of business in the private sector. Increased availability of funds, in turn, can have a soothing impact on the interest rates. This move of RBI is welcome for, with the stable Government at the Centre and the economy recovering from the decades lowest growth of 4.7 per cent last year, investment demand and need for credit is expected to pick up.

RBIs yet another step to introduce a special term repo facility of 0.25 per cent of NDTL will compensate for reduction in available export credit finance. This is in keeping with recommendations of Dr. Urjit Patel Committee to move away from sector-specific refinance towards the provision of liquidity in the system for all productive sectors. Similarly, access given to foreign portfolio investors as also the domestic investors to participate in the domestic exchange traded currency derivatives market is also a step towards improving the liquidity in the domestic foreign exchange market. All in all, an effort has been made to improve liquidity in the system as the economy is about to turnaround.


Shailesh Vaidya, President, IMC

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